For more than a century, towns across Northern England have relied upon the
defence industry for employment.

In Brough in Yorkshire, Warton and Samlesbury in Lancashire and Barrow in Cumbria, generation after generation of the same families have worked in the local factory.

Here, in the supposedly dour Northern economy, young apprentices have helped to develop Britain's technological equivalents of the space shuttle – such as the Eurofighter Typhoon and nuclear submarine.

So, when jobs are cut or factories closed, the impact is devastating.

"I've been there 26 years, I started as an apprentice," said Leigh Johnson on Tuesday. "There are husband and wife teams in there. They will be looking for two jobs, it's not the best situation to be in."

The 42 year-old was speaking at BAE Systems' Brough site after the defence company said it was cutting 2,942 jobs across the UK and has entered consultations to end manufacturing at the Yorkshire site.

The Hull and Humber Chamber of Commerce said Brough was "almost a BAE town", while restructuring experts warned even local sandwich shops would be damaged by the "disastrous" knock-on effect.

"The supplier base to BAE will be impacted as lower demand in the sector for materials and other parts ripples through the market causing shrinkage in demand," Carl Jackson, head of recovery at RSM Tenon, said.

Increasingly, Northern England cannot rely on the defence industry as it once did. Even in Barrow, where BAE is making the Astute-class submarines and which was unaffected by the latest cuts, the number of workers has declined from a peak of 20,000 to just 4,500 today.

The amount Britain is spending on defence is sliding. Twenty years ago, the Government spent 10pc of its budget and 5pc of GDP on defence, today it is 5pc and 2.3pc respectively, according to trade body ADS.

Ian King, chief executive of BAE, said the job cuts were because of the "huge pressure" on the defence budgets of Western nations, and the need to "remain competitive" to win future work in the UK and particularly abroad.

He added: "The proposals aim to put the business into the right shape to address the challenges we face now and in the future and ensure we are in the best possible position to win future business. This transformation process is not going to be easy."

The cuts are spread over 15 sites, but 2,307 are from just three – Brough, Samlesbury and Warton. Brough has developed the Hawk jet trainer used by the Red Arrows, Samlesbury produces parts for fighter jets, and Warton conducts final assembly of the Eurofighter Typhoon. The plants are being affected by a slowdown in production of the Eurofighter and F-35 joint strike fighter.

Ed Miliband, the Labour leader, told his party conference that BAE had been "sold down the river" by the Coalition's spending cuts. The Government has cut £37bn of defence spending, scrapped projects such as the Nimrod spy plane, and implied that it will pursue a policy of "buying off the shelf" when it comes to defence contracts.

The BAE job losses show this strategy could be mutually exclusive with another key Coalition policy of rebalancing the economy.

Defence could be the anchor of the rebalancing of Britain, but instead there are new concerns about a diminishing skills base. The industry supports 300,000 jobs in the UK, provides £9.5bn of exports, and offers highly skilled jobs to young people. While other industries, such as car manufacturing, lost much of their global status during the 1970s, Britain remains the second biggest exporter of defence products in the world behind the US. BAE, with 40,000 employees, is the UK's biggest manufacturer.

However, ADS has warned up to 30,000 jobs – 10pc of the sector – are at risk from spending cuts.

"When the country is crying out for highly skilled specialists to help kick some life into the economy, BAE is being forced to make job cuts because of the Coalition's defence policies. The Government is sleepwalking through a defence skills crisis of its own making," said Tony Hammond of trade union Prospect.

The Government believes it can help to offset the impact of lower domestic spending and protect the defence workforce by promoting British goods for export. But the BAE cuts show the problems behind this strategy.

Export orders for the Eurofighter, from countries such as India and Japan, have not been attracted quickly enough to make up for a slowdown in orders from European nations. Secondly, export orders may not even lead to extra production in the UK. The Hawk, for example, is being made for India in India.

The other hope for workers in Britain's defence industry is the use of their skills outside the traditional spheres. BAE, for example, has produced hybrid-electric drive technology for dump trucks in Sweden, and is also investing in cyber-security.

"The defence giants in the US are buying healthcare companies like mad," says Guy Anderson, chief industry analyst at IHS Global Insight. "Although that isn't any good for those workers maintaining aircraft."

The automotive industry, ironically now growing after years of decline, and aerospace could provide new homes for BAE staff who are losing their jobs. EADS is understood to be considering whether it can offer roles at its Airbus plant at Broughton, which opens a major new extension next month.

"Aerospace is the greatest industrial success story that we have," says Ian Godden, chairman of ADS. "If we are smart as a nation, with Government and industry investment, then we can grow and create more wealth from the long-term opportunities in aerospace to compensate somewhat for the engineering and manufacturing losses in defence."

However, for the communities in the North of England with BAE defence factories, this will be no consolation. Quite simply, they need their main customer to buy products from them. But this customer has debts of £940bn.